Lessons for business from the resignation of Sepp Blatter

Lessons for business from the resignation of Sepp Blatter

Power corrupts, but not instantly, a leading professor of Strategy and Entrepreneurship has warned.

Julian Birkinshaw, Professor of Strategy and Entrepreneurship, London Business School, made the remark in an article today in City A.M., two days after the Fifa president announced his resignation.

“We know that power corrupts, but it doesn’t corrupt instantly. Over the years, leaders who lack integrity gradually take control of the various levers of power, they surround themselves with acolytes, and they reduce the strength of the mechanisms designed to hold them in check.”

Foremost, Professor Birkinshaw explains that we crave leaders with integrity – those who are able to do the right things for their organisations and who have the social awareness to see when their own position has become untenable.

Blatter, he says, clearly failed on both counts, as did Dick Fuld at Lehman, Fred Goodwin at RBS, Jean-Marie Messier at Vivendi, and Dennis Kozlowski at Tyco.

Although there are plenty of leaders who have acted with integrity, exiting before they were pushed, or standing up for a point of principle, Professor Birkinshaw said they don’t get anything like as much attention as the corporate villains.

“If we cannot rely on our leaders to show integrity, we need robust governance and control systems to keep them in check. Fifa, of course, was in a unique position – it had no competition, it had control over a product that everyone wanted a piece of, and it based itself in Switzerland. It was essentially unaccountable, which of course is why Blatter was able to hold on for so long.”

Professor Birkinshaw noted in comparison that corporate leaders are held to account through a range of formal and informal mechanisms.

“They have internal controls to keep them honest. There are external auditors, analysts, activist shareholders, and corporate raiders to keep them in check, and there are public forums, from the press and glassdoor.com to blogsites, where leaders can be named and shamed when they misbehave.”

Although this is an impressive set of checks and balances, it is not always enough. “Why do some companies still get away with dodgy or fraudulent activities, despite all these controls?” questioned Professor Birkinshaw.

So what can we do differently? Professor Birkinshaw recommends drawing inspiration from the world of politics.

“In the recent UK General Election, David Cameron, Ed Miliband and the other party leaders had to submit themselves to direct, often plain rude, questions from the public on live television. They were subject to ritual humiliation on satirical quiz shows. The newspapers trawled through their personal lives. A lot of this was over the top and unedifying. But it helped to keep the party leaders’ egos in check. Can you imagine Blatter, or some of the corporate leaders mentioned above, submitting themselves to this sort of public accountability?”

Professor Birkinshaw said that western democracies have three key advantages in their governance models that the corporate world – and Fifa – should take heed of.

One is that leaders are held to account on a very personal level. The second is that activism is encouraged. The third is the idea of term limits – while not applied in the UK, no US President can spend more than 10 years at the top.

“These are not crazy principles for the business world. Partnerships, such as law and accounting firms, have elections and term limits. There are even some business organisations, WL Gore for example, that elect their leaders. If we cannot guarantee that our leaders will show personal integrity, we need to find more robust ways of keeping their power in check.”